Zero
A zero is a type of share or bond. Its key feature is that it pays no annual dividend, or coupon.
A zero is a type of share or bond. Its key feature is that it pays no annual dividend, or coupon. Instead, the security is issued at a discount to its face value (also known as its par value), but is redeemed (bought back by the issuer) at face or par value.
The result is the holder should enjoy a capital gain over the life of the security. This type of instrument is often issued by split-capital investment trusts some of the shares issued are 'zeros' and the rest 'ordinary'.
Zeros are tax efficient gains are typically taxed at the capital-gains tax rate of 18% and so can be useful to an investor looking to pay a big future bill such as school fees. But there are risks. If, say, the issuer goes bust, the holder may get nothing back.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
-
Are you one of 15 million people at risk of retirement poverty?
Two-fifths of people in the UK aren’t on track for a minimum lifestyle in retirement, new data shows. Are there steps you can take to boost your pension?
-
150 banking hubs now open across UK – is there one near you?
As the 150th banking hub opens its doors, a Post Office deal that offers basic banking services has also been extended until 2030. We explain what this means for you